Reuters reports that it's a tough road ahead for Iraqi private banks required to raise their capital to boost business as they battle against decades of state dominance to win a slice of the asset base from government-run enterprises.
It blames a poor credit culture, the lack of a modern banking system, and the dominance of state banks, for slowing development in the financial sector.
Many Iraqis remain do not have bank accounts, and there are concerns that most business in the country is done through direct cash dealings, which have security implications.
Economist Salam Smeism commented:
"We still have the remains of a central management which is still forcing government offices and ministries to deal with government banks exclusively, and consequently all the deposits are going into state banks.
"Where is the benefit in having the money go from the government to the government? We need to develop the private sector."
Executive director of the Iraqi Private Banks League, Abdul-Aziz Hassoun, said Iraq nationalised its private banks in 1964, paving the way for dominance of the financial industry by the country's state banks.
After the U.N. imposed economic sanctions in 1991, private banking once again opened up in Iraq. The OPEC country has seven state-owned banks, 23 private banks and eight Islamic private banks, according to the central bank website.